How is Group Income Protection Taxed?

I’ve been looking into arranging Group Income Protection Insurance for my employees to provide wage insurance in case they’re absent following an accident or sickness. I was just wondering about the taxation of Sick Pay Insurance and how it works if someone unfortunately needs to claim.

Question asked by P Osborne
Compare Top 10 UK Insurers
Providing Whole of Market Advice
Type of Cover
Company Name
 
Number of Employees

Answered by Michael Englefield

Group Income Protection Insurance is taxed slightly differently from the Income Protection you’d take out on an individual basis.

When you buy Income Protection as an individual, it’s paid for out of income you’ve already paid tax and National Insurance on (i.e. your wages). That means should you need to make a claim on an Accident and Sickness policy, the benefit you receive is normally tax-free.

How is Business Income Protection taxed?

Is Group Income Protection taxable?

However, when an employer takes out company Income Protection Insurance for their employees, usually it is a business expense you can reclaim against corporation tax.

As a result, in most cases the benefit from Group Income Protection is subject to income tax when an employee has to claim.

Group Income Protection payouts are paid as a salary continuance to the employer, who then distributes this to the employee via the PAYE system. The benefit is then taxed in the normal way as if it were earned income from the employer.

Is Group Income Protection Insurance a benefit in kind?

No, in most cases Group Income Protection is not treated as a taxable P11d benefit in kind for the employee.

Group Income Protection
 
Employee Benefits
 
P11d Benefit in Kind
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Compare Top 10 UK Business Insurers

Frequently Asked Employee Benefits Questions

 
I want to ensure my family are able to realise the value of my share in our business should the worst...
 
We have taken out a sizeable business loan and I am wondering whether it is mandatory or just best practice...
 
I own a company and I’m looking to take out group protection policies for my employees. However,...
 
I’ve recently changed jobs and my new employer has said they’ll sign me up for the company...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Trevor Massey
22/01/2019

Excellent service from start to finish. Both Jack & Jake were both helpful and polite through the process. I would recommend Drewberry to family and friends.

Adriana Fouche
31/01/2019

Oliver was great at explaining things, with patience. He called back when he said he would, and spent a lot of time to make sure the policy meets my needs.

Robin Condliffe
12/02/2019

Victoria Slade has been consistently prompt, personable, efficient and a great communicator. It is the first time that we have had straightforward dealings with financial services since becoming qualified doctors 20 years ago. Well done!

We are rated 4.9/5 based on 2024 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.92 / 5 Average
2024 Reviews
H CONDLIFFE
Overall Rating
Victoria Slade has been consistently prompt, personable, efficient and a greta communicator. It is the first time that we have had straightforward dealings with financial services since becoming qualified Drs 20 years ago. Well done!
K Szymkiewicz
Overall Rating
Rauri Taylor is Independent Protection Expert who you want to help you with any Pensions, Investments & Insurance. He helped me made right choice.
S Brocklehurst
Overall Rating
Professional service, Oliver seemed genuinely interested in getting the right product for me. I was given plenty of options and everything was described fully when required. I felt no pressure to purchase a product.
G Bigga
Overall Rating
Helpful, knowledgeable and efficient and able to find great prices. I would highly recommend
N Lawton
Overall Rating
Everything was very well organised. Sam took the time to explain all of the options very thoroughly so that I could choose the right policy.